NEW YORK–Economists at Goldman Sachs are predicting the Federal Reserve will cut interest rates in the second quarter of 2024, regardless of whether the U.S. economy enters a recession.
"The cuts in our forecast are driven by this desire to normalize the funds rate from a restrictive level once inflation is closer to target, not by a recession," Goldman Sachs’ Chief U.S. economist David Mericle wrote in a research note.
If the Fed does indeed cut rates, it will be a reversal of an aggressive campaign of boosting rates that has pushed its benchmark interest rate currently to range of 5.25% to 5.5%, the highest level since 2001.
What’s Expected
"(By Q2 2024), we expect core PCE inflation to have fallen below 3% on a year-on-year basis and below 2.5% on a monthly annualized basis, and wage growth to have fallen below 4% year-on-year," Mericle wrote. "Those thresholds for cutting align roughly with the annual forecasts in the FOMC’s Summary of Economic Projections and the conditions at the outset of the last cutting cycle motivated by an intent to normalize from a restrictive policy stance as inflation came down in 1995."
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